TaxTMI 
TaxTMI 
2026 (2) TMI 293
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.... application under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("the Code") filed by State Bank of India for initiation of the Corporate Insolvency Resolution Process (CIRP) of Kamachi Industries Limited (Corporate Debtor). By the same order, the petitioner was appointed as the Interim Resolution Professional (IRP) to conduct the CIRP. 3. It is submitted that the said engagement was agreed at a consolidated fee of Rs. 7.42 lakhs, comprising IRP fees of Rs. 1.65 lakhs and support service fees of Rs. 5.77 lakhs. 4. It is submitted that on 05.05.2020, the first meeting of the Committee of Creditors (CoC) of the Corporate Debtor was convened, wherein the petitioner was proposed to be confirmed as the Resolution Professional (RP) on the same fee structure as approved at the IRP stage. 5. However, it is submitted that the CoC did not approve the proposed fees in the first meeting, expressing its desire to commercially negotiate the consolidated fees. 6. Thereafter, a second CoC meeting was held on 09.06.2020, wherein the fees was fixed at Rs. 4.50 lakhs, comprising RP fees of Rs. 1.65 lakhs and support service fees of Rs. 2.85 lakhs for support service provider (Qua....
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.... at the same professional fee which is approved by State Bank of India. CoC members consented for the same. He further appraised to approve the fee of for support services at Rs. 5.77 Lacs (exclusive of Taxes) detailed breakup given in Exhibit - B. CoC members took note of the same and informed that they will take approval on the same from their higher authorities. The agenda is put for e- voting." 2.3.2 The Exhibit-B to the first CoC disclosed head wise fees for the support services as follows: Sr.No. Particulars Name and Designation Monthly fee chargeable Ii Professional fee, if any, payable to Consultancy firm associated with IRP for infrastructural support Quantuum Resolution P Ltd 135000 Iii Professional fee towards engagement of industry specialist to run the operations of CD Mr. Hari Iyer 65000 Iv Professional fee towards engagement of full time Chartered Accountant Shomit Bagchi- FCA 75000 V Professional fee towards retainership of Insolvency lawyer/Advocate in the CIRP for other than appearing in cases contested by any other stakeholders Pooja Ojha - CS, LLB 60000 Vi Renumeration to MIS/Data/IT spec....
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.... may to be put before the CoC for discussion and consensus. Accordingly, we suggest that another CoC meeting may be convened, at an early date, after getting opinion from the other CoC members." The stand of the SBI was concurred by other CoC members viz. Bank of India and Andhra Bank. 2.3.6 Thereafter 2nd CoC meeting was held on 09.06.2020 where it was noted as follows: "IRP informed CoC Members that at the time of selection process a consolidated Fee of Rs.7.42 Lacs comprising IRP fee of Rs. 1.65 Lacs and Support Service Fee of Rs. 5.77 Lacs was submitted and approved by State Bank of India. During the meeting CoC members negotiated and the total fee was further reduced to Rs.4.50 Lacs, resulting the fee of Support Service Agency Fees of Rs. 2.85 Lacs plus applicable taxes and OPE. The agenda of the same is put for voting. ...CoC also requested IRP to provide the complete details of the team members of Support service, IRP informed that he has presented the team composition in the 1st COC meeting and same shall be shared again with all the COC members." 2.3.7 Thereafter, the following resolution was put for voting and approved by CoC after 2nd ....
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.... meeting. 2.3.8 The DC also notes the statement of fees of support services as provided by Mr. Vikas Prakash Gupta as follows: FY 2020-21 FY 2021-22 FY 2022-23 Total Particulars Support Fees Support Fees Support Fees Support Fees 1) Piyush Jani 9,31,755 7,26,500 9,22,500 25,80,755 2) Pooja Ojha 2,25,000 8,25,000 1,50,000 12,00,000 3) Sidharth Gupta 3,24,504 7,80,000 5,74,382 16,78,886 4) BackOffice Support Staff 13,89,565 13,89,565 5) Ashish Gohil 3,40,645 5,40,000 8,80,645 6) Accountsmann & Co 2,63,700 3,00,000 1,50,000 7,13,700 7) Mrunalini Damle 3,55,833 4,50,000 8,05,833 8) Ramesh Kumar & Associates 1,40,000 - 1,40,000 9) Sunil Kumar Dixit - 1,00,000 1,00,000 10) Dipty Ranjan Mishra 1,44,000 1,44,000 11) ROC Sunita 23,000 23,000 Total 34,41,524 34,27,978 27,86,882 96,56,384 The DC notes that the above statement does not provide any fee being paid to Quantum. Further, there are s....
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....lar dated 16.01.2018 was subsumed in the Code of Conduct of the IP Regulations by way of following clauses The relevant clauses of the Code of Conduct is as follows: "25C. An insolvency professional shall ensure that the insolvency professional entity or the professional engaged by it raises bills or invoices in their own name towards their fees, and such fees shall be paid to them through banking channel." (inserted on 04.06.2022) ... "26A. An insolvency professional shall not accept /share any fees or charges from any professional and/or support service provider who are appointed under the processes." (inserted on 13.09.2022) 2.3.13 The transfer of fee by Mr. Vikas Prakash Gupta was extended over the financial year 2020-21 to 2022-23. Hence the contravention will be covered initially by the circular dated 16.01.2018 and subsequently by Clauses 25C and 26A of the Code of Conduct. 2.3.14 With regards to the submission of Mr. Vikas Prakash Gupta that the same issue, in the complaint was examined the IPA and no irregularity was found by the IPA in the payment process, the DC perused the grievance closure of the IIIP-ICAI dated 25.07.2023 a....
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....kas Prakash Gupta provides his services, if any. The CoC/SCC may decide whether to continue his services or not. In case the CoC/SCC decide to discontinue his services, the CoC/SCC may file an appropriate application before the AA. 3.5. A copy of this order shall also be forwarded to the Registrar of the Principal Bench of the National Company Law Tribunal, New Delhi, for information. 3.6. Accordingly, the show cause notice is disposed of. Sd/- (Sandip Garg) Whole Time Member Insolvency and Bankruptcy Board of India Sd/- (Jayanti Prasad) Whole Time Member Insolvency and Bankruptcy Board of India Dated: 25 April 2025 Place: New Delhi 14. Aggrieved with the aforesaid, the petitioner has filed the present petition. 15. While challenging the said order the petitioner has submitted as under:- i. The petitioner has already suffered punishment exceeding that imposed by the Impugned Order. It is submitted that in terms of Regulation 23A^1 of the IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, the Authorisation for Assign....
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....support services and fixed only the upper limit of CIRP costs, as contemplated under Section 28 of the Code. The case of the petitioner is that under Section 28 of the Code, the power of the CoC is only limited to approve the upper limit of CIRP costs and not to approve each appointment made by the RP to assist in the CIRP. ix. It is submitted that the petitioner has the right under the Code and the regulations flowing from it, to appoint his support staff team, and pay them as per the fees approved by the CoC. x. It is also emphasised that the Impugned Order records no finding whatsoever of unlawful gain, derived by the petitioner under Section 220(3) of the Insolvency and Bankruptcy Code, 2016. It is submitted that the petitioner did not retained any sum in excess of the RP Fee earmarked for him by the CoC. xi. It is submitted that the entire allegation, even if assumed to be correct, pertains at best to a procedural or secretarial non-compliance. xii. The CoC was kept duly informed of all such matters, and CoC did not ever make any objection. xiii. In order to substantiate its case the petitioner has placed reliance on Sandeep Kumar B....
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....65 lakh in any manner he deemed fit, he was not entitled to receive or redistribute the separately approved support service fee contrary to the CoC's decision. vii. Further the case of the respondent no. 1 is that the timeline prescribed under Regulation 13(2) of the IBBI (Inspection and Investigation) Regulations, 2017 is directory and not mandatory, as evident from the expression "shall endeavour to dispose of the show cause notice". The Regulation does not prescribe any consequence for non-adherence to the indicative timeline. Accordingly, mere consumption of time beyond the period mentioned in Regulation 13(2) does not invalidate the disciplinary proceedings or the Impugned Order. viii. The respondent also submits that no double jeopardy has been caused to the petitioner. It is submitted that Suspension of Authorisation for Assignment (AFA) under Regulation 23A of the IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 and suspension of registration under Section 2205 of the Insolvency and Bankruptcy Code, 2016 operate in distinct fields and serve different purposes. ix. It is emphasised that the Suspension of AFA under Regul....
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....ch of this Court, while delineating the scope of judicial review under Article 226 in matters arising from disciplinary proceedings of the IBBI, observed as under- "31. Ordinarily, the writ court would not interfere in matters arising out of disciplinary proceedings or administrative decision, save and except where there is apparent or palpable infraction of a statute, statutory rule or regulation or the proceeding displays violation of the principles of natural justice. It is trite that it is the decision-making process and not the decision itself which may be open to judicial review under Article 226 of the Constitution of India. Yet another facet to consider such category of matters is on the proportionality of the penalty imposed. It is trite that unless the penalty imposed is such which shocks the conscience of the court, or that which no prudent man would reach, no interference by courts is warranted, ordinarily. This view of this Court stands fortified from the judgment of the Supreme Court in Union of India v. K.G. Soni7. The relevant paras are extracted hereunder: (SCC pp. 797-799, paras 13 and 15) "13. In Union of India v. G. Ganayutham this Court summed....
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....mental freedom and the need for the restriction thereupon. (4)(a) The position in our country, in administrative law, where no fundamental freedoms as aforesaid are involved, is that the courts/Tribunals will only play a secondary role while the primary judgment as to reasonableness will remain with the executive or administrative authority. The secondary judgment of the court is to be based on Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn. and Council of Civil Service Unions v. Minister for the Civil Service principles as stated by Lord Greene and Lord Diplock respectively to find if the executive or administrative authority has reasonably arrived at his decision as the primary authority. (4)(b) Whether in the case of administrative or executive action affecting fundamental freedoms, the courts in our country will apply the principle of 'proportionality' and assume a primary role, is left open, to be decided in an appropriate case where such action is alleged to offend fundamental freedoms. It will be then necessary to decide whether the courts will have a primary role only if the freedoms under Articles 19 and 21, etc. are involved and not for Ar....
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....iples of natural justice; (ii) where the decision-making process itself is vitiated, rather than the decision on merits; and (iii) where the penalty imposed is grossly disproportionate, such that it shocks the conscience of the Court. 20. Applying the above principles to the present case, this Court is of the considered view that the penalty imposed upon the petitioner does not meet the test of proportionality. Also, certain relevant aspects have not been considerate while passing the impugned order. 21. The gravamen of the allegation against the petitioner, as also the finding recorded by the Disciplinary Committee ("DC"), is that pursuant to the decision taken in the second meeting of the Committee of Creditors, Quantum Resolution Professional Private Limited was approved as the support service agency, and consequently, payments towards support services were required to be made directly to Quantuum. It has been observed that the petitioner, Mr. Vikas Prakash Gupta, by drawing the entire professional fee into his personal account, acted in contravention of the approval accorded by the CoC as well as the relevant Circulars issued by the Insolvency and Bankru....
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....ion for Assignment stood automatically suspended as per regulation 23A of the IBBI (Model Bye- Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016. The petitioner submitted his reply on 19.04.2024. However, the impugned order came to be passed only on 25.04.2025, nearly one year thereafter. As a consequence, the petitioner remained subjected to suspension of AFA for almost one year even before the final adjudication, and was thereafter visited with an additional penalty of one year suspension of registration by the impugned order. 28. Though it is true that suspension of AFA pending disciplinary proceedings and suspension of registration upon conclusion of proceedings operate under different provisions and are distinct in nature, the cumulative effect of the delay has resulted in the petitioner effectively suffering a bar from professional assignments for a period of almost two years. 29. The Disciplinary Committee, while imposing the penalty of one year's suspension, failed to account for the prejudice already suffered by the petitioner on account of the prolonged pendency of proceedings and the mitigating circumstances noted hereinabove. 30. C....
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....ided that where such loss or unlawful gain is not quantifiable, the total amount of the penalty imposed shall not exceed more than one crore rupees. (4) Notwithstanding anything contained in sub-section (3), the Board may direct any person who has made unlawful gain or averted loss by indulging in any activity in contravention of this Code, or the rules or regulations made thereunder, to disgorge an amount equivalent to such unlawful gain or aversion of loss. (5) The Board may take such action as may be required to provide restitution to the person who suffered loss on account of any contravention from the amount so disgorged, if the person who suffered such loss is identifiable and the loss so suffered is directly attributable to such person. (6) The Board may make regulations to specify- (a) the procedure for claiming restitution under sub-section (5); (b) the period within which such restitution may be claimed; and (c) the manner in which restitution of amount may be made. ============= Document 1 ANNEAURE P - 8 213 à¤à¤¾à¤°à¤¤à¥€à¤¯ दिवाला और शोधन à....
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.... order daied 19.02.2020 of the Adljudicating Authecity (AA) wherein you were appointed as the interim Resolution Professional (NP). Subsequently, you were confinned as the Resolution Professional (RP) in respect of the CD Thereafter, you demitted the office of RP on 09 12.2022. 3.In exercise of its powers conferred under Section 218 of the Code read with Regulation 70} and 7(2) of the IBBI (Inspection and Investigation) Regulations, 2017 (Inspection and Investigation Regulations), IBBI appointed an Investigating Authority (IA) to conduct investigation into the allegations contained in a complaint in the seatter of CD. 4. The IA served upon you the notices of investigation as per Regulation 8(1) of the Inspection and Investigation Regulations and in response thereof, you submitted your reply on 16.08.2022. Aler considering your reply the !A subnutted the Investigation Report (IR) to the Board, a copy whercof is annexed herewith as Annexure A. 5. Based on the said IR and materia! available on record, the following has been observed with respect to your assignment as IRP)/RP in the CIRP of CD: I. It is noted from the minutes of second meeting of the ('oC that an agenda was....
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....ted by an IP shall raise bills / invoices in his / its name towards such fees, and such fees shall be paid to his / its bank account. These provisions are intended to segregate fees of RP and support services in order to avoid any commingling so as to ensure fair dealings. 6. It appears that you were not segregating fee for yourself and for Quantum as decided by CoC and as required by Circular No. IP/004/2018 dated 16.01.2018. Further, you disclosed in CIRP Form-2 to IBBI half-truth and misleading information that your fee is inclusive of fee for support services and concealed this crucial information from IPA. This conduct indicates, a design in taking consolidated fees in your account in defiance of CoC decision and IBBI circular. Complete unsubstantiated claim of an arrangement of payment to employees of Quantum through you or directly, further corroborates that your claims are just an afterthought and is nothing but a ruse to camouflage the truth. 7. In view of the above the Board is of prima facie view that by your above-stated conduct and actions, you have contravened Regulation 7(2)(a) and (h) of IP Regulations read with Clause 1,2,3,25A and 26A of the Code of Conduct ....
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....u for contraventions of the provisions of the Code and regulations, as stated above. 7. You may submit your reply to this show cause notice in writing, along with the material, if any, in support of your defence, to the undersigned, latest by April 19, 2024 from the date of receipt of this notice In case, you desire to have an opportunity of a personal hearing before the Disciplinary Committee, you may indicate the same in your reply. 8. The show cause notice along with its annexures and copy of the investigation reports, your reply with documents relied upon by you, if any, will be placed before the Disciplinary Committee for consideration and disposal in accordance with Section 220 of the Code and Regulation 13 of the Inspection and Investigation Regulations. 9. In case no reply to this show cause notice is received from you by the due date, it shall be deemed that you have nothing further to say, and the show-cause notice shall be disposed of on merits, ex-parte. Yours faithfully, meinichais (Keshav Kumar Giridhari) Deputy General Manager Document 2 Statement of Kamachi RP and Support Fees FY 2020-21 FY 2021-22 FY 2022-23 Total Particulars RP Foes Suppo....